Question

Abigail is an executive for Oak Furniture Manufacturing Company. Abigail purchased furniture from the company for $7,000. The price Oak ordinarily charges a wholesaler is $8,500. The retail price of the furniture was $12,000, and Oak's cost was $8,000. The company also paid for Abigail's parking space in a garage near the office. The parking fee was $1,200 for the year. All employees are allowed to buy furniture at a discounted price comparable to that charged to Abigail. However, the company does not pay other employees' parking fees. Abigail's gross income from the above is:

A) $7,000
B) $8,000
C) $8,500
D) $9,200

Answer 1

Abigail's gross income from the above is $8,500.

Step-by-step explanation:

Abigail's gross income from the above is $8,500.

To calculate Abigail's gross income, we need to consider the following:

Abigail purchased furniture from Oak Furniture Manufacturing Company for $7,000, which is lower than the retail price of $12,000 and also lower than the price charged to a wholesaler ($8,500). Therefore, Abigail benefits from a discounted price of $7,000, which is considered part of her gross income.

In addition to the discounted furniture, the company also pays for Abigail's parking space in a garage near the office. The parking fee is $1,200 for the year. However, this expense is not included in Abigail's gross income because it is a company benefit and not received as direct compensation.

Based on this, Abigail's gross income is $8,500 ($7,000 for the discounted furniture).